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Geothermal Fracking: What Are the Risks and Potential Claims?

August 31, 2011

The natural gas industry's decades-long use of hydraulic fracturing, or "fracking," to extract natural gas from deep within the earth has become the subject of increased attention recently due to concerns about the potential impact that fracking may have on human health and the environment. Because the geothermal industry has begun to employ a similar fracking process to obtain steam for electricity generation, questions are beginning to arise as to whether geothermal fracking operations create risks comparable to those alleged to result from natural gas fracking operations. While the similarity in fracking procedures used strongly suggests that both industries may be susceptible to the same kinds of risks and resulting claims and suits, including claims based on bodily injury and property damage, one clear difference in potential liability across industries appears to exist, at least with respect to potential pollution liability.

Does Fracking Differ Across Industries?

Fracking typically involves high-pressure injection of fluid into wells in an effort to fracture the rock and release trapped resources, such as oil, gas, water or steam. The basic premise of fracking tends to be the same across all industries that use it. In fact, the process is so similar that a new trend is developing whereby geothermal companies are seeking to minimize their up-front costs, including drilling costs, by using wells that have been abandoned by oil and gas companies. While the abandoned wells may no longer have oil and gas resources, they may be able to generate the hot water and steam required by geothermal plants. Some geothermal companies have begun receiving federal grants to generate electricity using geothermal energy harnessed from abandoned oil and gas wells in Texas.1

While the basic process of drilling wells may be the same, one clear difference in process arises with respect to the composition of the fracking fluid that is used. Natural gas companies often include chemical additives in their fracking fluid, some of which are alleged to be toxic. Concerns about these chemicals have spurred a number of studies aimed at determining whether the chemicals pose health and environmental hazards. Plans also are under way to establish an energy subcommittee, backed by the Department of Energy (DOE), the Environmental Protection Agency (EPA) and the Interior Department, to investigate potential risks associated with fracking and the chemicals used.2 Geothermal companies reportedly primarily use fresh water, or salted or brined water for fracking.3

Do the Potential Risks and Claims Arising Out of Fracking Differ?

Because natural gas companies and geothermal companies use the same general fracking process of high-pressure injection of fluid into wells in an effort to fracture the rock and release trapped resources, the potential exists for similar claims arising out of such operations, regardless of the industry. These include claims arising out of earthquakes and well blowouts.

Both natural gas and geothermal fracking operations have been linked to earthquakes. For example, in March 2011, natural gas fracking operations in Arkansas were under investigation to determine whether fracking had caused a recent increase in earthquakes in the area. Earlier, a natural gas fracking operation in West Virginia was required to limit its fracking activities when it was suggested that an injection well was causing tremors. The tremors allegedly ceased when the injection activities were curtailed.4

Similarly, at least two geothermal fracking operations have been halted following earthquakes.5 In 2006, Basel, Switzerland, experienced 100 tremors. While the earthquakes caused no bodily injury, damage to local buildings amounted to about $9 million.6 After studies suggested that geothermal fracking operations had caused the tremors, the Swiss Government terminated the project. Then in 2009, the DOE shuttered a geothermal fracturing project in California following an investigation into the cause of increased seismic activity in the area. During the investigation, it was revealed that the California plant operator had been aware of but had failed to disclose, that the plant was using similar procedures to the previously halted Basel project.7

Therefore, to the extent that both natural gas and geothermal fracking operations have been linked to earthquakes, the potential for bodily injury and property damage claims arising out of such earthquakes exists. In so far as commercial buildings may suffer earthquake damage, the potential for business interruption claims is also apparent.

Natural gas and geothermal fracking operations also are susceptible to claims arising out of risk attributable to well blowouts. In recent years, gas well blowouts have been reported in a number of states, including Louisiana, Pennsylvania and Wyoming. To varying degrees, the blowouts have resulted in injuries and deaths of workers, caused nearby homes to be evacuated and spawned investigations into whether the blowouts resulted from human error or from the use of defective pipes or cement. In some cases, well operators have been ordered to pay fines to the Department of Environmental Quality and ground water cleanup costs.8

The most widely publicized geothermal blowouts have been overseas, including in Australia, Chile and Japan. Like the natural gas blowouts, the geothermal blowouts have resulted in injuries and deaths to workers as well as allegations that plant operator error, including the selection of incompatible design materials, caused the blowouts.9

This blowout risk is indicative of the potential for bodily injury and wrongful death claims that may be brought by employees, contractors or subcontractors working on, maintaining or attempting to repair wells at natural gas and geothermal plants, as well as of the potential for bodily injury, wrongful death or property damage claims from neighboring landowners. Blowouts also could result in claims based on negligence arising out of operator error, such as the use of the wrong or defective materials; claims for cleanup costs under the Resource Conservation and Recovery Act (RCRA) and the Clean Water Act; potential claims from state and/or federal agencies seeking injunctive relief; and claims for fines and penalties.10

It is clear that both natural gas and geothermal companies also have exposure to litigation risk from neighboring landowners. Last year, Pennsylvania residents living near natural gas fracking operations sued a number of natural gas companies. The suits generally allege that the companies were negligent in their drilling, construction and operation of wells, and that they allowed pollutants, such as fracking fluid, to be discharged into neighboring soil and groundwater. The suits also allege diminution in property value, physical injury and fear of future illness.11

While there have been no published reports of suits arising out of geothermal fracking operations, the potential for such suits and claims exists based on the similarity of the methods used by both industries. Moreover, geothermal companies are not strangers to lawsuits by neighboring landowners. In years past, neighboring landowners have brought suit against geothermal companies alleging air and noise pollution, bodily injury, property damage and diminution in value.12

Although the potential for similar claims and lawsuits exists across the industries that use fracking, at least one potential difference is apparent. Because many geothermal companies reportedly primarily use water, without any chemical additives in their fracking operations, these companies may be less likely than natural gas companies to face potential claims arising out of pollution, bodily injury or property damage arising out of the alleged use or release of toxic chemicals in their fracking operations. However, water, if it contains salt and brine, is not innocuous. The EPA, for example, has cautioned that salt can accumulate in surface waters, such as lakes, ponds and streams, harming aquatic life, including fish and plants. Moreover, if salt migrates to underground drinking water supplies, it can contaminate wells and corrode plumbing infrastructure.13 Thus, to the extent that they use salted or brined water in their fracking operations, geothermal companies and natural gas companies may still be susceptible to claims arising out of pollution, bodily injury or property damage if it is alleged that the use of brine can have an adverse impact on human health or the environment.

Conclusion

In sum, due to the similarity of the basic fracking process utilized by both natural gas and geothermal companies, the likelihood for comparable claims and lawsuits being asserted against these industries is high, most notably with respect to claims arising out of earthquake damage and well blowouts. While both natural gas and geothermal companies alike face the potential for pollution claims, the kinds of allegations asserted may differ, at least in so far as geothermal companies reportedly rely more on saltwater injection and less on chemical additives in their fracking operations than natural gas companies.

[10]See, e.g., http://www.oag.state.md.us/Press/2011/050211.html (stating that Maryland's Attorney General had issued a letter of intent to sue a natural gas company for alleged violations of RCRA and the Clean Water Act arising out of the release of thousands of gallons of fracking fluids into a tributary of the Susquehanna River in April).